CA: Initiative seeks to add new tax to oil companies' profits (to fund alternative energy industry)

Capitol Weekly ^ | 3/16/06 | Shane Goldmacher

[NormsRevenge]

Alternative energy researchers are hoping that California voters get a chance to act on their rage against oil companies at the ballot box in November--and alternative energy companies are pointing to the initiative as the boost needed to get the industry off the ground. However, critics of a new initiative effort say the main beneficiaries would be the venture capitalists behind the campaign.

The group Californians for Clean Alternative Energy is gathering signatures to place an initiative on the November ballot that would impose a tax on oil production in California. The Clean Alternative Energy Act would place a tax of between 1.5 percent and six percent on the value of oil drilled within the state borders, with the percentage being going up along with the price of oil. The money would then be used to fund alternative energy research, incentives for clean vehicles and other programs.

Given that California trails only Alaska and Texas in domestic oil production, this would result in significant amounts of research money: an estimated $380 million a year between 2007 and 2017. The tax would expire in 2017 unless extended by voters. California produces 268 million barrels of oil per year, 12 percent of the nation's total, according to state figures.

According to Fiona Hutton, a spokeswoman for the initiative's sponsors, oil companies would be legally barred from passing the cost of the tax on to consumers. States are allowed to do this, she said, as validated by the 1983 Supreme Court decision Exxon vs. Alabama.

"You've got big oil companies reporting record profits while Californians are paying someone of the country's highest gas prices," Hutton said. She also pointed towards a hearing in Washington D.C. earlier this week, when politicians from both sides of the aisle excoriated oil company executives for these profits.

According to Jon Van Bogart, western region sales manager for the Texas company Clean Fuel USA, a November poll conducted by the National Resources Defense Council found that over 70 percent of California voters supported the ideas in the initiative. Meanwhile, he said, chronically underfunded energy researchers are champing at the bit.

"That would apply more money to alternative fuel programs than has been supplied in U.S. history," said Van Bogart.

But Al Lundeen, a spokesman for Californians Against Higher Taxes encouraged voters to look at who is behind the initiative: Hollywood producer Steven Bing and Silicon Valley venture capitalist Vinod Khosla. The two have given a combined $2 million, Lundeen said. Lundeen's group, meanwhile, has gathered more than $500,000 to oppose the initiative, most of it from oil companies.

Bing is a major Democratic donor. Khosla, Lundeen said, stands to gain if the initiative passes. His former employer, Kleiner Perkins, is a major investor in Ion America, a company that makes fuel cell technology. He started his own venture capital firm last year, Khosla Ventures, and has been touting the potential of biofuels developed from plants.

Lundeen also pointed to a January report from the Legislative Analyst Office that pointed out that oil companies would deduct the severance tax from their profits, reducing the income taxes and other taxes the state could collect.

University of California at Berkeley energy professor Dr. Daniel Kammen pointed out that the many other states have taxes on oil producers. This includes the two biggest oil producers, Alaska and Texas, which have taxes of nine percent and five percent, respectively.

State Senator George Runner, R-Antelope Valley, countered that those states have far lower burdens in terms of environmental regulations and other taxes. There are already so many limitations on oil production in California that oil producers in his district have sometimes stopped pumping.

"You can't just say that Texas has this tax so we need this tax," Runner said. "You have to look at the whole cost of doing business."

[Ingtar]

And then they will whine and wonder why their gas prices go up more to cover the cost of the tax.

[American Quilter]

All three of my siblings live in California. One plans to leave as soon as her husband (a deputy sheriff) is eligible to retire (about 5 years), but the other two love living in L.A. and San Diego respectively and will never leave. Me, I got out 30 years ago, and consider myself fortunate. That beautiful state is being turned into a socialist hell.

[Uncle Hal]

Folks if this measure gets on the ballot, the oil companies will pour so much money into defeating this measure the voters will not even know what they are voting for. If it gets on the ballot it will lose big time.